Thank you for inviting me here
tonight to address the Auckland Property Investors'
Association meeting. This is the second of a series of
meeting with private property organisations, that I am
planning to hold around the country in an attempt to keep
groups, not considered to be "mates" of the government
better informed of developments in their area.

To
begin with, I want to acknowledge the important role that
private property investors play in housing our nation.
In particular, they provide for the majority of the
housing needs of families who don't own their own home.
In spite of the impression given by the Labour-Alliance
government, of the 315,000 rental housing units in New
Zealand, only 70,000 of those are owned by the state, while
15,000 are owned by local authorities and 230,000 by the
private sector.

There are some 170,000 private property
investors in New Zealand who invest, according to the ASB
bank, an estimated $42.5 billion into the rental property
market. The Bank claims that rental property is the
second most popular investment option after managed funds.
Yet in spite of that significant investment in meeting
the housing needs of families who don't own their own
home, private property investors have been maligned, even
pilloried by the Labour-Alliance government. It appears
to view a market-based rental contract between tenant and
landlord as some form of exploitation.

That was a very
clear message at the last election when Labour and the
Alliance campaigned on income related rents for state house
tenants. They claimed income related rents would
alleviate poverty, and at the same time drive down
private property rents.

The reality is that income
related rents will never be a cure for poverty, as they
well know, only proper welfare reform can do that.
Further, choice and the free market have ensured that rental
returns have remained steady, illustrating that the
government understands neither business nor
incentives.

While 270,000 families continue to receive
financial assistance through the accommodation
supplement, income related rents, has brought rent
reductions for some 40,000 low-income families. This
has caused an increased housing need. Why would you bother
to have a lodger if you are only paying $50 a week in
rent? The increase in housing need has strengthened the
rental housing market, not weakened it as the government
had hoped.

Income related rents have re-introduced
privilege and discrimination into our welfare system.
Those who have the state as their landlord can now obtain
cheaper rents than those who do not, irrespective of
need. As such, it is not a policy that ACT can support. It
is also a policy that historically was shown to be a
disaster.

In the eighties, with Helen Clark as Minister
of Housing, income related rents caused waiting lists to
grow to over 50,000. Overcrowded families lived in
garages and shacks to get themselves to the top of the
waiting list. It spiralled out of control.

As a
result, the Labour government introduced market rents and
the fore-runner to the accommodation supplement. Yet in
spite of that lesson of history, the labour government
have once again introduced income related rents, not
because it will be sustainable in the long term, but by
sounding caring and compassionate, it helps them to buy
power.

Already there are over 10,000 families on the
waiting list for a state house, and the number is growing
rapidly. There are also some 20,000 families who live
in state houses who do not qualify for income related
rents. The government did not have the courage to include
in the legislation mechanisms to encourage families to
move into private sector homes in order to free up state
houses for more needy families.

The pursuit of
political power is also, I believe, the major reason for
the outburst by the Minister of Housing against private
landlords earlier this year. In June he hit the
headlines with landlord stories: "Bad landlords should
be penalised" , "Government to toughen up on landlords",
"Crackdown on landlords likely".

The Minister has
responded to such lobbying by talking tough about bad
landlords and promising to bring in harsher penalties
against them. By doing so he hopes to win voter support
from the hundreds of thousands of tenants who will gain
the impression that he is looking after their
interests.

The question that needs to be asked,
however, is how big the so-called problem of `bad'
landlords really is? Is the problem so widespread that
the government can justify bringing in legislative or
regulatory change to deal with it?

I don't think
so.

Of the 42,000 applications to the Tenancy Tribunal,
the state agency which deals with disputes that landlords
cannot sort out between themselves, only 8% are filed by
the tenants against landlords. According to the Ministry
of Housings annual report, only a couple of hundred of
those were complaints about work needing to be done on the
property they were living in. It is not clear how many of
those landlords were the state or local government.

The Minister has already acknowledged that most landlords
readily comply with the Tribunals orders. A government
report "found no evidence that the current legislative
standards for rental housing were too low or flawed.
Instead the problems seem to be in administering and
enforcing the legislation".

For the minority of
landlords who are derelict in their duty, severe
penalties already exist. The recent case of a landlord being
fined $40,000 by a local authority for providing
substandard housing illustrates the extent of their
enforcement powers. The Tenancy Tribunal can also issue
orders and award penalties of up to $12,000.

If the
Minister carries out his threat of regulating for stiffer
penalties on landlords, he would be targeting an estimated
170,000 residential property investors, in order to
punish maybe 15-20 `bad' landlords. That action would
bear the hallmarks of a crusade against private
landlords. It would send the message that this government
intends to treat all landlords as criminals. It would be an
example of extremely poor governance, using a
sledgehammer to crack a nut.

Because the Labour
Government doesn't understand business, they have failed
to appreciate that the last thing an investor would want to
do is to devalue their investment. Rather than risking
undermining the equity in their property, most landlords
are only too willing to fix problems when they occur.

On the basis of information available, the government's call
for tougher penalties against landlords is a one-sided
affair, driven largely by tenants' advocacy associations
and housing lobby groups. Organisations representing
property owners and landlords allege that not only has
the government failed to inform them of proposed changes
to housing legislation, but that the Minister of Housing has
even refused to acknowledge their correspondence.

This is simply not good enough. The Minister of Housing has
a responsibility for all housing mattes and a duty to
promote balanced solutions to perceived problems.

The proposed changes to the Residential Tenancy Act, will
toughen up on landlords. It also proposes major changes
to the legislation effecting boarding houses in order to
bring them under the auspices of the Act. However, I
understand the changes that are being proposed could
effectively make the running of boarding houses too
difficult, and its effect could be to rob society of an
important residential option.

The reality is, that
private property investors are under attack by this
government. They must be active and vigilant in opposing
such proposals. They must make submissions when the
time is right. If they don't, the point of view of
tenants' advocacy groups will dominate the parliamentary
process and there will be no balance.

The Government
needs to recognise that private landlords offer
affordable accommodation to hundreds of thousands of New
Zealand families, many more than the government could
ever hope to house with its state housing supply. In
light of this partnership, it is also surely the role of
government to help prevent disillusionment by landlords
who feel that the government doesn't care about their
concerns.

The problem is that if too many landlords
decided to sell out of the more problematic lower end of
the housing market, it could result in a worrying
shortage of rental property.

In the spirit of that
partnership, the government should look more closely at
sorting out the causes of the 39,000 complaints to the
Tenancy Tribunal by landlords against their tenants. Most
of them, in fact, fall into two categories: recompense
for damage to the property and failure to pay the rent.
For years, landlords have expressed concern about tenants
who owe money and disappear, because the pursuit of
justice can be fraught with difficulty.

The problem is,
that after such cases appear before the Tenancy Tribunal
where a court order for rent arrears or damage is issued, it
then becomes the responsibility of the landlord to provide
their former tenant's new address to the Court, so the
debt can be collected. If the former tenant is a
beneficiary, the Department of Work and Income hides
behind the Privacy Act and refuses to provide details of
that new address to the Court.

This situation is
clearly untenable. As a party that upholds the rule of
law, ACT intends to amend the Social Security Act 1964 to
require the department to provide address details to an
officer of the Court for the purpose of debt collection.
In our mind, withholding that information in the present
manner is tantamount to aiding and abetting the
miscarriage of justice. This is an issue that has been in
front of the Ombudsman, for a year, but he has not
released his finding as yet. We await his decision with
interest.

There is a further issue of concern that
landlords have raised, which needs to be addressed. It
relates to ensuring that beneficiaries who rent a house
from a private landlord have the same ability to deduct
their rent at source as they have if their landlord is the
state. ACT would look to extend the automatic deduction
mechanism to all beneficiaries who rent, just so long as
they agree and complete the appropriate authorisation
forms.For some time, there has been a call by tenancy
advocacy groups to introduce a certificate of fitness for
rental properties. ACT would vigorously oppose regulating
rental properties in this way. The RTA already requires
landlords to keep their property in good order, and there
is no clear evidence that such a measure is necessary.

What ACT would like to see however, is more effort being
made to address issues relating to unsafe housing where
owner-occupiers are at risk of fire, ill health or other
negative consequences. A recent spate of house fires,
which cost the lives of children, have highlighted the
dangers of owner-occupied substandard housing.

A recent
report on the issue confirmed that over 90% of housing that
fell into that substandard category was owner-occupied, a
matter that must be of concern to local authorities. It
is however important to recognise that the cost of
bringing these houses up to a safe standard, should be
the responsibility of the homeowners themselves, not
ratepayers or taxpayers.

That is why ACT so strongly
opposes the government's new Special Action Housing Zone
Scheme. The SHAZ scheme as it is called, has given
seventy applicants who own homes that they have allowed to
fall into disrepair, with collapsed verandas, rotting
floorboards and the like, interest free grants of up to
$50,000 These grants don't have to be repaid and are
written off after three years.

Giving taxpayer's money
to people to spend on their own private housing, without
having to pay it back, is bad enough, but this scheme
sends absolutely the wrong signals. The message SHAZ sends
is that if you are a responsible home owner, you have to
spend your own money fixing your property, but if you are
not, the government will bail you out. The scheme also
demonstrates the absolute commitment of the
Labour-Alliance government to the redistribution of wealth
from those who are better off to those who are not,
irrespective of the negative incentives it creates.

Although the government has taken a hands-on approach to
housing for the purpose of buying voter support, it is
imperative that it keeps a balanced view. It should
ensure that not only do tenants and landlords alike know
their right, but that they should also understand their
responsibilities and obligations as well.

Housing a
nation is a major responsibility. It is a joint effort
that needs the private sector to work alongside the
government. Rather than attacking landlords, the
government would be wise to not only address their
concerns, but also to acknowledge their
contribution.

For more information visit ACT online
at http://www.act.org.nz or contact the ACT Parliamentary
Office at act@parliament.govt.nz.

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